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US Dollar

The US Dollar Index , which gauges the buck vs. a basket of its main competitors is looking to add to recent gains while keeping the trade above the critical 90.00 mark.

US Dollar focused on yields, data

The index is extended the upbeat mood at the beginning of the week after four consecutive daily advances.
The underlying tone around the buck remains firm with the next target at monthly peaks in the 90.60 area.

The recent strong rebound in DXY from last week’s lows in the 89.20 area and has been in tandem with a significant raise in yields of the key US 10-year benchmark, which is trading at shouting distance from the key 3.0% level.

The pick up in the risk on sentiment in response to mitigated concerns on the geopolitical front as well as in the US-China trade conflict has been also lending support to the buck via a higher USD/JPY, as outflows from the Japanese safe haven has accelerated as of late.

Speculators added to USD net shorts during the week ended on April 17 to the highest level since February 13, as per the latest CFTC report.

Data wise later in the NA session, Existing Home Sales during last month are due seconded by the Chicago Fed National Activity Index, while Markit will publish its preliminary Manufacturing PMI for the current month.

US Dollar relevant levels

As of writing the index is up 0.14% at 90.47 and a break above 90.60 (high Apr.6) would open the door to 90.89 (38.2% Fibo of 95.15-88.25)
Finally 90.93 (high Mar.2).
On the other hand, the next down barrier lines up at 89.81 (10-day sma) followed by 89.23 (low Apr.17) and then 88.94 (low Mar.27).

The new week has begun much like last week ended, with rising rates.It helps to extend the dollar's recent gains. The US 10-year yield is flirting with the 3.0% threshold. The two-year yield is firmer, and, like in the second half of last week, the US curve is becoming a little less flat.

The market, as we had anticipated, was not so impressed with North Korea's measures. Korea's Kospi edged lowed, and the region-leading KOSDAQ fell a little more than 1% (still up 10% year-to-date). Foreign investors sold $400 mln of Korean shares today. The amount is large in this context, and foreign investors had only sold $100 mln this month coming before today and $1.1 bln year-to-date.

The MSCI Asia Pacific Index fell 0.5%, extending the pre-weekend nearly 1% decline to slip below the 20-day moving average. European markets are mostly heavier too. The Dow Jones Stoxx 600 is off 0.2%, lead by utilities (rate sensitive), real estate and consumer staples. This is a big week for bank earnings, and the financial component of the index is flat-to-firmer. US shares are trading fractionally weaker.

The main economic news has come in the form of the flash PMI readings. Japan's April manufacturing April PMI edged higher to 53.3 from 53.1 in March. It is the first increase since January. The eurozone flash composite was unchanged at 55.2, reflecting a small increase in services offsetting a somewhat larger decline in manufacturing. The flash manufacturing PMI fell to 56.0 from 56.6 and the services PMI is at 55.0 rather than 54.9.

We suspect three forces are at work behind the apparently stalled momentum in the eurozone this year. First, Q4 likely overstated the growth, so call this reversion to mean. Second, the poor weather dampened activity in Q1, so this should fade. Third, the eurozone economy is entering the latter part of the expansion cycle. The first two forces may be more evident than the third.

The North American session calendar is light. Canada reports a wholesale trade, after soft CPI and retail sales reports before the weekend. The US dollar is extending last week's recovery against the Canadian dollar and is testing the CAD1.28 level, which was the neckline of the technical pattern that had informed our near-term view. A move above CAD1.2830 could spur a move to the CAD1.29 congestion area.

The US sees Markit's flash US PMI, which may not spur more than a flutter around the headlines and existing home sales for March. They are expected to have edged higher for the second consecutive month, and remain near cyclical highs. The two highlights come at the end of the week, the first estimate of Q1 GDP and the Employment Cost Index.

The dollar is near session highs as American participants return. The Dollar Index is at its best level since March 1. We suspect that the top of the range three-month range near 91.00 is too far today, given the stretched intraday technical readings. But if it does, a breakout may be at hand.

Having closed just below $1.23 last week, the euro has approached $1.22, the lowest end of its range, though it did spike to $1.2155 on March 1. The intraday technicals are extended. On the other hand, the greenback is pushing above JPY108.00 for the first time since mid-February. Although the dollar was firmer in Asia, it has been gaining in the European time zone that has driven the gains. The bottoming pattern we have been monitoring projects toward JPY110.00.

Sterling has been sold to a marginal new low for the month near $1.3965. A break of this area could signal another near-term, even if not today, cent decline. The Brexit debate became more complicated last week as the House of Lords endorsed remaining in the customs union by a wide margin. A poor Tory showing in next month's local elections and defeat in the House of Commons could spur a leadership challenge. Separately, after the recent soft data and comments from Governor Carney last week, the odds of a BOE rate hike were downgraded from nearly a done deal (87.5% on April 13) to a strong maybe (49%) before the weekend. The odds are slightly higher today.

The Australian dollar is making new lows for the year today, as it is sold through last month's lows. Recall the Aussie posted a key reversal on April 19 and saw strong follow-through selling ahead of the weekend. After pushing through $0.78, it finished last week near $0.7670 and is approaching $0.7600, where a 2.5-year trendline is found.

South Korea’s Finance Minister Kim Dong-yeon closely watching currency markets as USD strengthens
South Korea’s Finance Minister Kim Dong-yeon was on the wires earlier today noting that the government is closely watching currency markets as the won weakens, in the wake of the recent USD appreciation.He added that the government will act to stabilize the foreign exchange market if needed.

LONDON, June 28:: The dollar held near one-year highs on Thursday as conflicting signals about developments in the trade row between Washington and its business partners prompted buying of the currency, with support also coming from half-year end rebalancing flows.

Though overnight headlines suggested a more conciliatory approach from Washington, broader risk appetite remained modest in the currency markets, with perceived safe-havens such as the Japanese yen and the Swiss franc firmly supported.

U.S. President Donald Trump said on Wednesday he would use a strengthened national security review process to block Chinese acquisitions of sensitive American technologies, a softer approach than imposing China-specific investment restrictions.

“The latest headlines indicate a slightly softer stance but markets would be wary of reading too much into it for now, which explains the strength of the yen and the franc,” said Thu Lan Nguyen, an analyst at Commerzbank in Frankfurt.

In early London trading, the dollar edged 0.3 percent higher to 95.51 against a basket of its rivals, just below a mid-July 2017 high of 95.529 hit last week.

Though the yen showed some weakness overnight, it remains firmly below a 2018 high of above 111 yen per dollar hit last month. The Swiss franc, another risk barometer, also remains firmly below 1.16 per euro, a level considered too strong for the central bank’s comfort.

The euro was on the back foot, with likely weak data and political concerns in Germany weighing. It was down 0.2 percent at $1.1538.

German Chancellor Angela Merkel’s fragile coalition government faces potential collapse as the Christian Social Union (CSU), her Bavarian ally, has threatened to defy her and impose border controls unless their demands to reduce Germany’s immigration burden are met.

There was some confusion about Washington’s trade intentions, with U.S. shares making an about-turn and dropping after White House economic adviser Larry Kudlow told Fox Business Network that Trump’s announced plan did not indicate a softened stance on China.

“The dollar has managed to stay buoyant despite a drop in Treasury yields and risk-off in U.S. stocks due to half year-end flows, which involves U.S. investors buying back the dollar,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities in Tokyo.

“It remains to be seen how long flow-driven bids can support the dollar. Headlines on trade issues will continue to dictate direction once such flows subside.”

Among other major event risks is an EU summit starting on Thursday, from which Brexit-related headlines might sway the pound. In recent days, however, sterling has been moved more by expectations of UK rate changes.

The Australian dollar bounced modestly after sliding the previous day on the U.S.-China trade tensions. The Aussie was up 0.2 percent at $0.7356 after plumbing a 1-1/2-year trough of $0.7323 on Wednesday. (Reporting by Saikat Chatterjee; Additional reporting by Shinichi Saoshiro in TOKYO; editing by John Stonestreet)

The dollar rose to a six-month high against the yen and steadied against other major peers on Thursday after U.S. inflation data reaffirmed expectations that the Federal Reserve will hike interest rates two more times this year.

While financial markets remained vexed by fears of a full-scale Sino-U.S. trade war, investors’ focus was drawn to the slightly stronger-than-expected producer price reading which boosted confidence in the world’s top economy.The dollar firmed 0.3 percent to 112.29 yen after rising as much as 1.3 percent in U.S. trade on Wednesday, breaching the 112-barrier for the first time since Jan. 10.The dollar’s index against a basket of six major currencies edged up towards a one-week high of 94.769 reached overnight, trading at 94.753.Investors were looking U.S. consumer inflation data due at 8:30 a.m. local time (1230 GMT) for further clues on when and how fast the Fed will raise interest rates.“The consumer inflation reading could be strong as oil prices have been high, which could lead to more support for the dollar,” said Minori Uchida, chief currency strategist at MUFG Bank.“But oil prices have already started to come down, and I don’t think long-term interest rates will rise that much. That means I don’t think support for the dollar won’t really continue even if the dollar is bought at first,”

The biggest annual increase in 6-1/2 years in June U.S. producer prices, thanks to gains in the cost of services and motor vehicles, set the scene for an upside surprise in the consumer price index numbers.As the dollar held firm, the euro lacked momentum, trading at $1.1675, edging further off a 3-1/2-week high off $1.17905 touched on Monday.On Wednesday, nervousness in broader currency markets over an escalation in the U.S.-China trade war was slightly more contained than in equity markets, where there were hefty falls globally after Washington threatened 10 percent tariffs on $200 billion worth of Chinese imports.“If the U.S. levies tariffs on $200 billion worth of Chinese imports, China can’t levy tariffs on a similar amount, but it is likely there will be some kind of sanctions,” said Kazushige Kaida, head of foreign exchange at State Street Bank.“If that continues to escalate, not only the U.S. will be hit on a macro-economic level, but China’s macro-economy, and countries with macro-economic ties to China, will be impacted as well.”The Canadian dollar weakened against the dollar as broad-based gains for the greenback offset an interest rate hike and the prospect of further tightening by the Bank of Canada.

The Canadian dollar was nearly flat in Asia on Thursday at C$1.3210 per U.S. unit, after having fallen about 0.75 percent the previous day.The Turkish lira hit a record low of 4.9767 lira per dollar earlier on Thursday before bouncing back slightly to 4.8998 per dollar as the currency was roiled by worries about economic management under a new presidential system. (Editing by Shri Navaratnam and Kim Coghill)

The dollar slipped on Monday, having notched up its biggest weekly gain in a month last week, as a rebound in risk appetite prompted investors to diversify away from their long dollar bets which have grown rapidly in recent weeks.Outstanding dollar bets are at their highest levels since early 2017 with latest weekly data showing yet another increase in positions as growing concerns about trade tensions and a rebound in U.S. economic data fueled demand for the greenback.“What we are seeing now is some sort of a reversal in that trend as European economic data have shown some improvement while the U.S. economy is displaying classic symptoms of a late-cycle,” fund manager Constantin Bolz of German-based wealth manager Portfolio Concepts said.

Against a basket of its rivals, the greenback fell 0.2 percent to 94.60 after rising 0.7 percent last week, its biggest weekly rise since mid-June.The dollar’s growing inverse correlation with global risk appetite has also fueled a near 6 percent rise in the greenback over the last three months. Monday’s bounce in European stocks led by strong results from Deutsche Bank, snapped that trend.A rebound in global risk appetite on Monday, despite some tepid Chinese economic data, has dampened fears about an escalating trade conflict between Beijing and Washington and boosted higher-yielding currencies.That reach for risk was evident in currency markets. The Swedish crown rallied half a percent to 8.8330 crowns per dollar despite home prices data showing a further cooling in price growth.

That reach for risk was evident in currency markets. The Swedish crown rallied half a percent to 8.8330 crowns per dollar despite home prices data showing a further cooling in price growth.The euro edged 0.2 percent higher to $1.1703 after weakening half a percent last week.“This unexpected U.S. exceptionalism had been one major obstacle for broader 2018 expectations of modest broad dollar index,” JP Morgan strategists said in a note.

But analysts worried that the U.S. economy’s outpeformance may be coming to a close.The yield differential between ten-year U.S. Treasury yields and two-year maturities tightened to 24 basis points, its lowest since August 2007. Narrowing spreads is taken as an indicator for a slowing economy.The risk of a further escalation in trade conflict and a softness in Chinese data has kept the dollar supported with investors whittling down their positions in Asian currencies in favour of the euro and the Swiss franc.China’s economy expanded at a slower pace in the second quarter as Beijing’s efforts to contain debt hurt activity, while June factory output growth weakened to a two-year low in a worrying sign for investment and exporters as a trade war with the United States intensified.The Australian dollar edged 0.2 percent higher at 0.7433 cents per dollar. Volumes were lower as Japanese markets were out on a holiday.

In terms of economic data, U.S. Federal Reserve Chairman Jerome Powell’s semi-annual testimony on the economy and monetary policy before the Senate Banking Committee on Tuesday will be keenly watched by investors.

The dollar slid lower against a currency basket on Tuesday ahead of congressional testimony by Federal Reserve Chairman Jerome Powell, which markets will be watching closely for any indications on the path of interest rate hikes.The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was down 0.12% to 94.16 by 03:37 AM ET (07:37 AM GMT).Powell is to begin two days of testimony on the economy and monetary policy later Tuesday when he appears before the U.S. Senate Banking Committee in Washington.He is due to appear before the House of Representatives Financial Services Committee on Wednesday.Powell is expected to reiterate that the Fed is on track to continue with a gradual pace of rate hikes but investors will be on the lookout for any indications that U.S. trade policy is clouding the outlook for tightening.On Monday, the International Monetary Fund warned that escalating trade tensions are threatening to derail the economic recovery, adding that financial markets seem complacent to the mounting risk.The dollar was steady against the yen, with USD/JPY last at 112.33, holding below last Friday’s six-month highs of 112.79.Financial markets In Japan reopened on Tuesday after a holiday on Monday.The euro pushed higher against the softer dollar, with EUR/USD rising 0.18% to 1.1729.The pound was a touch higher, with GBP/USD edging up 0.1% tp 1.3247.Meanwhile, the Australian dollar was slightly higher, with AUD/USD gaining 0.13 to trade at 0.7428.The New Zealand dollar climbed higher, with NZD/USD advancing 0.81% to a near one-week high of 0.6833.

The dollar and euro held tight ranges on Wednesday, ahead of a meeting between U.S. President Donald Trump and European Commission President Jean-Claude Juncker as investor focus shifted to the trade rift between the two economic powers.

The dollar index against a basket of major currencies stood little changed at 94.555, off its two-week low of 94.207 hit on Monday.Fears of a trade war with the United States kept the euro trapped in narrow ranges as Juncker travels to Washington on Wednesday for trade-focused talks with Trump. The talks come after the U.S. imposed tariffs on EU steel and aluminum and Trump’s threats to extend those measures to European cars.“If there is a further escalation of the trade issue, that could potentially hurt the risk sentiment and put pressures on the dollar/yen,” said Shinichiro Kadota, senior FX & rates strategist at Barclays.

The euro booked a slight gain after data released on Tuesday showed business growth remained robust, yet below forecasts.The single currency was trading 0.1 percent higher at $1.1695.

Against the yen, the dollar was nearly flat at 111.27 yen per dollar.The yen has found some support early this week on expectations the Bank of Japan might be a step closer to scaling back some of its aggressive monetary stimulus.Risk appetite remained mostly firm, supported by strong U.S. corporate earnings and hopes China will boost fiscal support for its economy.The Australian dollar was 0.1 percent lower at $0.7412 .The Aussie gave up early gains of about 0.3 percent, following Beijing’s promise this week to pursue a more “vigorous” fiscal policy. (Editing by Sam Holmes)

Today in Asia was once again characterized by ongoing Yuan sell-off, which sent the Antipodeans lower while the Aussie suffered the most, weighed further by a miss on the Australian CPI numbers. The Kiwi fell back below the 0.68 handle after the New Zealand trade report surprised markets to the downside. Meanwhile, the USDJPY pair defended gains amid higher Japanese stocks and 2-year Treasury yields.Among other related markets, the Asian equities traded higher, except for the Australian markets. Both crude benchmarks traded with moderate gains while gold prices on Comex were modestly flat near $ 1225 levels.